Good morning, everyone. My name is Jamie and I will be your conference operator today. At this time, I would like to welcome everyone to Novanta Incorporated's fourth quarter and full year 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, you may press star and then one on your touchstone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Ray Nash, Corporate Finance Leader for Novanta. Please go ahead.

Thank you very much. Good morning, and welcome to Novanta's fourth quarter and full year 2025 earnings conference call. This is Ray Nash, Corporate Finance Leader for Novanta. With me on today's call is our Chair and Chief Executive Officer, Matthias Glostra, and our Chief Financial Officer, Robert Buckley. If you've not received a copy of our earnings press release issued last night, You may obtain it from the Investor Relations section of our website at www.novanta.com. Please note this call is being webcast live and will be archived on our website shortly after the call. Before we begin, we need to remind everyone of the safe harbor for forward-looking statements that we've outlined in our earnings press release issued last night and also those in our SEC filings. We may make some comments today both in our prepared remarks and in our responses to questions that may include forward-looking statements. these involve inherent assumptions with known and unknown risks and other factors that could cause our future results to differ materially from our current expectations. Any forward-looking statements made today represent our views only as of this time. We disclaim any obligation to update forward-looking statements in the future, even if our estimates change, so you should not rely on any of these forward-looking statements as representing our views as of any time after this call. During this call, we will be referring to certain non-GAAP financial measures, a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent that we use non-GAAP financial measures during the call that are not reconciled to GAAP measures in the earnings press release, we will provide reconciliation promptly on the investor relations section of our website after this call. I'm now pleased to introduce the chair and chief executive officer of Novanta, Matthias Glastro.

Thank you, Ray. Good morning, everybody, and thanks for joining our call. We said we would return to organic growth and double-digit profit growth in the fourth quarter, and we delivered. Noventa posted record revenue in the fourth quarter with 9% reported growth, 2% organic growth, and 4% sequential growth. Booking surged 25% year-over-year and 12% sequentially with a book-to-bill of 1.11. Every single business delivered double-digit bookings growth and a positive book-to-bill in the same quarter. That's the first time that's happened since 2022.

For the full year, we hit $981 million in revenue, our biggest year ever.

Full-year bookings grew 14%. New product revenue grew over 60% in the full year, including over 80% growth in the fourth quarter, exceeding our expectations as our commercial excellence and innovation investments are paying off. These results set us up well for mid-single-digit organic growth in 2026. We also demonstrated strong double-digit year-over-year profit performance in the quarter with adjusted EBITDA growing by 17% and adjusted diluted EPS growing by 20%. While these are strong results, margins and cash flow came in below the expectations we set on our third quarter call. This came down to a single deliberate decision. As we move through the quarter, we prioritize customer deliveries over the pace of our regional manufacturing transfers. That was the right call for our customers, and it created a temporary period of higher dual running costs and elevated inventory. We have already acted on this in January, and Robert will walk through the specifics and our confidence in the recovery. Given the very highly dynamic environment, I'm very proud of our business performance and our team's ability to stay resilient and deliver these strong results. Taking a step back, Novenza's long-term growth strategy remains focused on winning in high-growth end markets with durable secular tailwinds, AI-driven robotics and automation, minimally invasive and robotic surgery, digital manufacturing, and precision medicine. We hold leading technology positions in these markets with exclusive design and product relationships that typically last up to a decade on our customers' platforms. We have established these unique long-term collaborative partnerships with the leading OEM customers across the world by solving their most complex needs with proprietary technologies and solutions while leveraging the Novanta growth system to deliver on-time, high-quality products at the lowest possible cost. While our products typically represent no more than 10% of our customers' bill of material, They enable differentiation and innovation in their systems for their customers, improving clinical outcome, throughput, yield, cost per procedure or part, or never before possible performance. We've made disciplined, focused investments in the platforms we believe will drive the majority of our innovation-driven growth. Next-generation insufflation and POPs, robotic surgery technologies, intelligent physical AI solutions for connected care, warehouse automation, humanoids, and precision robotics, and intelligent subsystems for laser beam steering and precision medicine. These growth platforms represent a four billion dollar incremental market opportunity by 2030. Our strategic focus is to continue to expand our business mix and technology leadership in medical technologies, medical consumables, and embedded software, further strengthening a portfolio that delivers predictable, sustainable, and consistent revenue, profit, and cash flow growth. With customer destocking behind us and accelerating new product and commercial excellence momentum, we're well on the path to get back to our long-term algorithm. Mid to high single-digit organic growth with less cyclicality, better resilience to geopolitical risks, and more consistent performance regardless of the market conditions. Acquisitions are the second pillar of our growth strategy, driving double-digit reported revenue growth and compounding cash flows. The setup here has never been stronger. Our teams have built the largest acquisition pipeline in my tenure as CEO, focused on mid to larger opportunities in metal technologies, medical consumables, bioprocessing, and embedded software. In November, we raised more than $600 million, specifically because of our confidence in this pipeline, with nearly a billion and a half in total acquisition capacity and a proven track record of discipline value creation, we're actively working multiple opportunities and expect to deploy meaningful capital in 2026. Now, here's what we're seeing across our end markets and businesses. Our sales into minimally invasive and robotic surgery applications remain consistently strong with mid-teens double-digit growth in our advanced surgery business this past year. Our next-generation insufflator set the industry standard in improving patient safety, addressing smoke evacuation requirements, and optimizing surgical workflows. We are poised for another year of double-digit revenue growth in 2026, as our new product launches from 2025 continue to scale up, and also with additional launches that are happening in 2026 itself. Long-term, the business is on track to achieve approximately $400 million in revenue by 2030, driven by continued momentum and insufflation, expansion into robotic surgery and arthroscopy, and a rapidly scaling medical consumable business. Our robotics and automation business continues to see a sustainable growth outlook with three distinct gen AI driven tailwinds. First, Noventus technology leadership in physical AI applications, unique capabilities that enable the perception and reaction of precision robotics in this physical world and to do so safely. In 2016, we're ramping several new product launches, including content we recently won in the warehouse robotic space. Second, a recovering semiconductor waiver fab equipment market where we're seeing signs of an upcycle starting to take shape. And third, a highly specific and compelling opportunity in GPU drilling. Our air bearing spindles are currently the only qualified supplier for drilling AI-driven GPU boards, a direct beneficiary of the ongoing build-out of AI compute infrastructure, and this application is growing at a strong double-digit rate. Together, these three drivers underpin our confidence in high single-digit growth for this business in 2026. Next, our precision manufacturing business has seen four consecutive quarters of double-digit bookings growth and accelerating sequential revenue momentum in the second half of 2025 driven by strong activity on inner target markets this give us confidence in seeing mid single-digit growth in the business in 2026 the long-term growth driver in this market is clear customers are digitizing and automating their manufacturing lines with ever-increasing demands for throughput productivity smaller form factors and higher tolerances this is a a durable multi-year tailwind for Noventa. What particularly excites me is our launches of intelligent laser beam steering subsystems with unique proprietary capabilities that we have been building for several years. We're hitting the market at exactly the right time as new digital and AI enabled manufacturing capabilities are moving from early adoption into broader deployment. Finally, our precision medicine business experienced another quarter of sequential revenue growth in the fourth quarter. This business continues to gradually digest the life science equipment and market dynamics and the associated technology obsolescence cycle we are working through. We continue to believe in the long-term opportunities in the life science equipment market and are seeing investments in connected care and early disease detection as big drivers of healthcare productivity. In 2026, we expect sales to be roughly flat in this business with some shifts in demand between our different product categories. Our investments in intelligent RFID solutions and advanced machine vision technologies are helping to stabilize the outlook for the business this year and have strong long-term growth prospects. In particular, we're pleased with the recent Keyon acquisition, which is already outperforming versus our early expectations, and helping to offer both near- and long-term growth opportunities for this business. Now, let me give you a brief update on how we're building a stronger foundation for future growth as an organization first the noventa growth system continues to become a deeper and more permanent way of working across the company our continuous improvement engine embedded in our event away culture ngs is a competitive differentiator that drives customer success and operational efficiency simultaneously and that combination is difficult to replicate here's what that looks like in practice this very week we have over a dozen simultaneous guys and events happening across nine different global locations with over 150 employees participating from senior leaders to frontline operators working together on commercial excellence innovation roadmaps supply chain optimization on-time delivery and our site regionalization initiatives on that last point our regionalized manufacturing initiative is designed to solidify and expand our preferred supplier status with leading OEMs globally helping our customers thrive in a de-globalizing world by manufacturing our products in the regions where they sell theirs. We're building manufacturing compensators with better scale stronger systems and deeper talent with full in region for region capability. The strategic logic is clear the customer response is very positive and the long-term benefits to profitability cash flow and resilience will be durable. To conclude, I'm very proud of our team's performance in 2025. As we look ahead, our top three priorities for 2026 are clear. First, drive mid-single-digit organic growth on the back of record bookings, new product launches, and commercial momentum. Second, acquisitions, deploying our billion-and-a-half capacity into larger opportunities in our target markets. And third, completing our manufacturing foundation, Foundation, finishing the regional transfers, scaling competence centers, and embedding the Novanta growth system across the organization. With that, I will turn the call over to Robert to provide more details on our operations and financial performance. Thank you, Matthias.

I'll start by reviewing some of the key performance metrics of the company. In the fourth quarter, Novanta bookings increased 25% year-over-year and 12% sequentially, with a book-to-bill of 1.11, indicating a stronger backlog and a positive outlook. All of Novantis' businesses had double-digit bookings growth and all had a positive book-to-bill in the fourth quarter. As Matthias mentioned, this has not happened in a single quarter since 2022, and it's strong empirical evidence that our organic growth outlook for 2026 is demand-driven and not aspirational. For the full year, bookings increased 14% and the book-to-bill was 1.01. New product sales in the fourth quarter grew over 80% year-over-year, raising the Vitality Index to 24% of sales. And for the full year, new product sales grew over 60% versus the prior year. And the full year Vitality Index was 22%. Our design wins were also strong, with company-wide design wins for the full year up over 20% versus the prior year. For both the fourth quarter and full year, our sales in the medical end markets represented 53% of total sales, while sales in advanced industrial markets were 47%. Also for the full year, our medical consumable sales were 15% of total company sales, with this category growing at a strong double-digit rate versus the prior year. Due to the high attachment rate we see in our next generation insufflator product launches. Now moving on to the financial results. Our fourth quarter 2025 non-GAAP adjusted gross profit was $118 million, or a 45.5% adjusted gross margin, compared to $112 million, or 47% adjusted gross margin in the fourth quarter of 2024. Adjusted gross margins were down 150 basis points year over year and down sequentially by 100 basis points. Gross margins came in below our November guidance, a direct consequence of the decision Matthias described. Prioritizing customer deliveries over transfer timing created higher dual running costs in the quarter with more than 100 basis point impact to gross margin and a 400 basis point increase to networking capital as a percent of sales. In January, we adjusted the cost structure without disrupting deliveries or revenue momentum. Gross margins are expected to step up sequentially in the first quarter, and the transfer will be completed by the end of the second quarter. As a result, our full year 2026 gross margin expansion target of approximately 100 basis points of expansion versus 2025 is intact. For the full year 2025, non-GAAP adjusted gross profit was $452 million or 46% adjusted gross margin compared to $442 million or 46.5% adjusted gross margin. Moving on to the fourth quarter, R&D expenses were $23 million or approximately 9% of sales. For the full year, R&D expenses were $95 million or approximately 10% of sales. Fourth quarter SG&A expenses excluding certain adjustments were $46 million or approximately 18% of sales. Full year SG&A expenses excluding certain adjustments was $181 million or approximately 18% of sales. Adjusted EBITDA was $61 million in the fourth quarter demonstrating strong growth of 17% year-over-year and achieving a 23.5% adjusted EBITDA margin. On the tax front, our non-GAAP tax rate in the fourth quarter of 2025 was 20.5 percent versus 24 percent in the fourth quarter of 2024. Our tax rate for the full year was 21 percent versus 20 percent in the prior year. And our tax rate increased year-over-year due to jurisdictional mix of pre-tax income. Our non-GAAP adjusted earnings per share was 91 cents in the fourth quarter, up 20 percent versus the prior year. This result was achieved despite adding 2.7 million incremental shares to our diluted share count from the November equity fundraise. For the full year of 2025, our non-GAAP adjusted EBS was $3.29, an increase of 7% versus the prior year. Operating cash flow in the fourth quarter was $9 million compared to $62 million in the fourth quarter of 2024. For the full year, operating cash flow was $64 million. Cash flow was impacted by the same regional manufacturing dynamics, higher inventory bills and temporary account receivable timing items, most of which have already been collected in January. As the site moves complete in the first half, we expect a significant inventory drawdown and strong cash rebound. Operating cash flow guidance for the full year is $145 million to $185 million, more than double our 2025 results. We ended the fourth quarter with gross debt of $260 million and a gross leverage ratio of 1.2 times. Our cash balance at year end was $381 million, and so our net debt was negative $121 million, giving us a net leverage ratio of a negative 0.5 times, which means we're in a positive net cash position for the first time in over a decade. Our debt balance was significantly reduced during the fourth quarter as we use the proceeds from the November fundraise to pay down over $300 million of our revolving credit facility, giving us near-term savings and interest expense. Partly offsetting this revolver pay down is the addition of the amortizing notes that were issued as part of the November offering, which added approximately $111 million in debt to our balance sheet. The remaining funds for November offering are shown as an increase to the equity section of the balance sheet. In the fourth quarter, we repurchased $19 million worth of company stock, and for the full year, we repurchased nearly $40 million of shares. While acquisitions remain our top capital allocation priority, we will still repurchase shares under our approved repurchase program when the value of purchasing the stock gives us a greater cash return versus the intrinsic future value of Novanta. I'll now share some details on the operating expenses. In the fourth quarter, automation-enabling technology segment revenue grew by 2% year over year, better than expected. The book-to-bill in this segment was 1.16, and bookings were up 33% year over year. For the full year, automation-enabling technologies grew sales by 2%, and bookings grew by 20%, and the full-year book-to-bill was 1.02. Our precision manufacturing business, which mainly serves the industrial equipment market, saw year-over-year revenue decline of 3% in the fourth quarter. However, this business saw sequential revenue growth of 8% and double-digit growth in bookings in the quarter, and we continue to see momentum build in this business. Our robotics and automation business grew revenues of 6% year-over-year in the fourth quarter and 2% sequentially. We continue to see a healthy outlook in this business with solid demand for advanced robotic applications and increasing strength in some semiconductor applications benefiting from the investment in artificial intelligence. For the automation enabling technology segment, adjusted gross margins were 49% up sequentially but down year over year, driven by the site regionalization dynamics as discussed. For the full year, adjusted gross margins were 49%, roughly flat year over year. New product revenue for the segment grew over 80% year-over-year in the quarter and nearly 90% for the full year. Customer design wins for the full year grew over 30% on the back of both innovation and stronger commercial execution by our teams. In addition, the vitality index was above 20% in the fourth quarter, then at high teens percent for the full year. And this is double last year's performance. Moving on to medical solution segment, revenue in the segment grew 16% year over year. This segment saw a book to bill of 1.07 in the fourth quarter, and bookings were up 17% year over year. For the full year, medical solutions grew sales by 5%, bookings grew by 8%, and the book to bill was 1.01. New product sales in the fourth quarter grew by nearly 80% year over year, and the vitality index in this segment was nearly 28% of sales. For the full year, new product sales grew by over 50%, and the vitality index was 27% of sales. Our advanced surgery business experienced 15% growth year over year, driven by both strong patient procedural surgical growth rates, and from our new product launches of our second-generation insufflators, which continue to see favorable demand from our OEM customers. These growth dynamics are expected to continue into 2026 and beyond. In our precision medicine business, which serves the life science and multi-omics market, sales in the fourth quarter grew by 16% year-over-year and grew sequentially by 4%. The year-over-year growth in this business was largely driven by the Keyon acquisition, as well as some favorable year-over-year comparables. The medical solutions segment, advanced gross margins were approximately 43%, which is roughly flat year-over-year. The margin performance was impacted by the manufacturing site dynamics as discussed. Now turning to guidance. We see steady improvement in customer sentiment for capital equipment demand, as OEMs and end users have largely adjusted to the current macroeconomic dynamics. As Matthias covered in his remarks, we see a very favorable growth outlook for three of the four businesses in 2026. For the full year of 2026, we expect GAAP revenue to be approximately $1,030,000 to $1,050,000, which represents 4% to 6% organic revenue growth. With the full year range, we expect to see sequentially increasing momentum in our quarterly organic growth. In the first quarter, we expect to see organic growth in the positive 1 to positive 3% range, and in the second quarter, we expect to see organic growth in the positive 5% to positive 7%, with a similar level of organic growth in the back half of the year. This confidence in the faster pace of organic revenue growth in the second quarter and beyond is driven by the good visibility we have in the recent booking strength and a growing backlog. For adjusted gross margins for the full year, we expect to achieve approximately 47%, which is 100 basis points of expansion year over year. This expansion is coming from completing the regional manufacturing production moves in the second quarter. Based on progress made thus far in the quarter, we feel good about the momentum we have here. We expect R&D and SG&A expenses for the full year to be approximately $294 million to $298 million. This represents roughly 28% of sales. This guidance excludes expected costs associated with our manufacturing MRP system, which is being deployed to support our regional manufacturing initiative and to position Novanta for further site consolidations and reduce complexity. Depreciation expense will be approximately $17 million in the full year, and we expect this to be approximately evenly split in each quarter. Stock compensation expense will be nearly $38 million for the full year, but the quarterly amount will vary due to the specific timing of some of our equity awards, including the one-time award that was granted in mid-2025 to replace the normal employee cash bonus program for that year. In the first quarter, we expect approximately $12 million of stock compensation expense. In the second quarter, we expect approximately $11 million of stock compensation expense, and then fall to approximately $8 million a quarter in the second half of 2026. For adjusted EBITDA for the full year of 2026, we expect to be between $245 million and $250 million, representing a low double-digit increase year-over-year, and we expect to achieve approximately a 24% EBITDA margin. Interest expense, net of interest income, is expected to be roughly $8 million for the full year of 2026, excluding any material changes in debt balances. This includes the interest expense associated with the recently issued amortizing notes. We expect our non-GAAP tax rate to be around 21% for the full year of 2026, roughly in line with 2025. Diluted weighted average shares outstanding will be approximately 41 million shares in 2026. This includes an estimate for the dilutive effect of our equity offering. As explained in details in our filings, the dilutive effect of the equity offering can vary based on the market price of Novanta's common shares. And so this guidance only factors in an estimate for dilution based on our recent share price performance and does not anticipate material declines in our share price in the future. For the full year, we expect diluted earnings per share to be in the range of $3.50 and $3.65, representing growth of up to 11% year-over-year. Included in this guidance is the unfavorable impact from our equity fundraise in the range of $0.22 to $0.24, spread evenly through the first four quarters. This reflects the impact of the higher share count, partially offset by lower interest expense. Also included in the guidance is the temporary unfavorable impact due to the one-time 2025 all-employee equity grant, which I just discussed. This was a 14-cent impact in the first half of 2026 only. Cash flow conversion for the full year is expected to rebound versus 2025. Full year, 2026 operating cash flow will be approximately $145 million to $185 million. With the bottom end of the range driven by higher inventory levels to mitigate risks in manufacturing moves and vendor disruptions, and the upper end of the range representing the successful mitigation of these risks. Turning to the first quarter of 2026, we expect GAAP revenues will be a range of $250 million to $255 million, which represents a year-over-year organic growth of positive 1% to positive 3%, and reported revenue growth of positive 7% to positive 9%. Looking at growth in our segments in the first quarter, automation-enabling technology segment is expected to achieve low-to-mid single-digit growth versus the prior year, which represents an acceleration in growth rate versus the fourth quarter based on the building momentum we see in the business's bookings and backlog. Medical solutions segment is expected to achieve high single-digit to low double-digit reported growth in the quarter. On a sequential basis, the medical solutions segment is expected to see normal sequential decline in the first quarter versus the fourth quarter due to seasonality. However, this business will still see solid year-over-year growth in the first quarter, And as I already mentioned, the full-year outlook for this business is extremely strong. For adjusted gross margin, we expect to achieve approximately 46.5% in the first quarter. This is a sequential step up from the fourth quarter and roughly flat year-over-year, representing the progress we have already made in the regional manufacturing moves. And as indicated in our full-year guide, we expect stronger year-over-year margin expansion in the second quarter and beyond. We expect R&D and SG&A expenses in the first quarter to be approximately $76 million to $77 million, which represents roughly 30% of sales. This is a higher percent of sales than the rest of the year will be based on two factors. First, we are aggressively deploying artificial intelligence tools and resources to our teams to deliver upside to our productivity goals for the year. We are seeing great progress in the adoptions of these tools to help us with many different areas, including selling processes, R&D programs, regulatory programs, and back office processes. Second, there's a higher impact from the stock compensation expense associated with the all-employee grant that only impacts the first half. Depreciation expense and stock compensation expense in the first quarter will be aligned with what I covered in the full year guidance. For adjusted EBITDA for the first quarter, we expect a range of $56 million to $58 million, which represents plus 12% to plus 17% growth year over year, and an adjusted EBITDA margin roughly 100 basis points higher than the prior year. Interest expense will be approximately $2 million in the first quarter. We expect our non-GAAP tax rate to be between 19% and 20% in the first quarter, slightly lower than the full year based on the timing of recognition of certain tax benefits. Deluded weighted average shares outstanding will be in line with what was covered in the full year guidance. For the first quarter, we expect adjusted diluted earnings per share to be in the range of 75% to $0.80, growing up 8% year-over-year. Again, this growth rate is impacted by both the share count increase from the equity issuance and the timing of stock compensation expense in the quarter. Cash flow conversion in the first quarter should improve versus the fourth quarter and should achieve our goal hitting cash conversion of greater than 100% of GAAP net income. However, with regionalization site initiatives still underway, we see stronger cash flow materializing after these are completed in the second quarter. In summary, we remain confident in our long-term strategy and business model. We see growing momentum, which will help us achieve mid-single-digit organic growth for the full year. We are excited about our customer wins, our bookings growth, and the continued momentum of our new product launches. We continue to make progress in high-growth markets, particularly in medical technology markets and physical AI robotic markets. And finally, with a successful fundraise, we have nearly $1.5 billion in acquisition capacity. This fundraise has unlocked our ability to explore multiple large potential opportunities, and we have a very robust acquisition pipeline. Combined with our track record and discipline of acquiring businesses that exceed our cost of capital within five years and our free cash flow accretive day one, we feel confident in our ability to deploy meaningful capital in 2026 that will drive strong long-term shareholder returns. This concludes our prepared remarks. We'll now open the call up for questions.

We will now begin the question and answer session. To ask a question, you may press star and then one on your touchstone phones if you are using a speaker phone we do ask you please pick up the handset prior to pressing the keys to ensure the best sound quality to withdraw your questions you may press star and two once again that is star and then one to join the question queue our first question today it comes from Lee Jagoda from CJS securities please go ahead with your question hey good morning guys good morning Lee so looking at the automation enabling technology segment first, and just the sequential increase in bookings of about 30 million bucks.

Can you go through sort of what businesses and what product categories are driving that increase, and how much of those bookings are longer lead time versus more book and ship within a quarter or two?

Yeah, Lee, it's pretty broad-based, right? We commented that all our businesses, so including also the medical solutions businesses, had double-digit bookings growth and a positive book to build for the first time since 2022. And we also commented that actually particular momentum was building actually in the AET businesses where you see a continued strong momentum building and robotics and automation driven by the drivers that I mentioned.

So, we have precision robotics where you need more perception and reaction for end of arm, which is both in Ryerson's automation, but also surgical robotics as well as, you know, humanoids and kind of a larger segment of precision robotics.

Secondly, we expect to see momentum in the semiconductor capital equipment market improving, and you see some bookings starting to come in. And then third, we have, you know, we're the sole source supplier for drilling and GPU boards for artificial intelligence, and that business is gaining strong momentum as well. So that's on the robotics and automation side. And on the precision manufacturing side, there's a combination of multiple factors. That business has shown double-digit bookings growth for four consecutive quarters last year, and revenue started to sequentially build really in the second half of last year with an 8% sequential growth in Q4. Now, that business is still modestly negative year over year in the fourth quarter, but we're, yeah, very confident that business will turn to mid-single-digit growth in 2026, driven by a few dynamics. One is customer de-stocking, which has been a headwind for this business for the last two years, has subsided, so that's one. And secondly, this business has very strong design win performance. And these design wins are coming up, you know, to speed in 2026 with bookings starting to appear.

And then third, this business has been working for multiple years on intelligent subsystems of laser beam steering. And these product launches that started to happen, you know, in the latter part of last year starting to hit crescendo in 2026 which is primarily driven by a variety of yeah let's say manufacturing advanced manufacturing markets that that need extreme precision and throughput whether it's laser edit of manufacturing micro machining actually supporting processes for gen ai infrastructure, but also you see some reshoring happening where actually the precision and throughput and productivity improvements are requiring to offset, let's say, productivity losses as a result of the reshoring. So we see multiple drivers in that business. We feel good about that business momentum building sequentially.

And I think the core message is this broad-based. it's it's it's not you know a single driver per se of a single business and we feel good where we are.

Hey Lee let me let me give you a couple pieces of data that might help so on the precision manufacturing business the book the bill was 1.2 that represented nearly 50 percent growth in bookings and a backlog amount of about a hundred a little over a hundred million dollars so you can see that a backlog is about two times that of revenue in the robotics Next in automation area, the business unit, the book the bill was 1.13, that was close to 25% growth in the quarter, and our backlog there is also roughly one and a half times our actual quarterly revenue. The advanced surgery business, which I might as well just go through that segment, had 1.12 book the bill. The backlog is roughly two times that of quarterly revenue. and that business had close to 15% quarterly growth on a year-over-year basis. And our precision medicine business had a book-to-bill of 1.01 with a backlog of nearly two times that of our quarterly revenue, and it had bookings growth of 22% year-over-year.

Got it. Now that's all very helpful. One more, and I'll just hop back in the queue. On the industrial robotics order you announced a quarter or so, Is there any update there, you know, any revenue expectations for 2026? And then any additional follow-through orders from either that customer or potentially other robotics customers after you kind of disclosed that order?

Yeah, I mean, we see that momentum building very steadily. And, you know, our remarks stay consistent with what we've said before, Lee. So it's a first phase of RAMP, which will be modest this year, and then it will be sequentially building from there. I think the key takeaway is that it's just a testament to our technology leadership in this area that leading players are selecting us, and that then creates a halo effect for other opportunities. So I think what I'm most excited about is just the broad-based precision robotics, end-of-arm physical AI opportunity for this business, which is both in surgical robotics, warehouse automation, humanoids, as well as other precision robotics applications. So that is what we – which is why we're seeing the momentum of that business sequentially building. So it's just one part of multiple drivers.

I will say that the, you know, you saw a couple announcements last year around both our servo drives, which are a key enabler of precision motion control within automation, within warehouse robotics, and within humanoids. We are working with the industry as well as the ISO organizations to help set the standard around how robots operate safely in a manufacturing environment as well as the home we are well positioned with that technology and our force force torques technology in humanoids and in warehouse automation we feel it is really superior to anything out there from a competitive perspective and you can see we are working with pretty much everybody out there when it comes to the humanoid markets and the leading players in warehouse automation so we feel really good about that technology as Matthias said it'll take a little time to kind of fully materialize and of course on the humanoid side a little bit binary in the short term but we could not be better positioned both industry wise and customer wise and hoping to grapple on to that opportunity great thanks very much our next our next question comes from Brian drop from William Blair please go with your question all right thanks for Thank you for taking my questions.

I mean, so much momentum on the top lines, the bookings, the orders, and the backlog. Can you just, again, maybe it's for Robert, but just bridge that momentum, kind of reconcile that with your expectation for the midpoint, I think it's about 9% PPS growth, and just to maybe rank order the investments again that are happening this year that will kind of maybe result in what might be perceived as a little bit of restrained earnings growth?

Yeah, I would say so the EPS growth, don't forget, we did the fundraise, right? And so the fundraise generated 22 cents to 24 cents of a headwind. Obviously, we don't want that headwind to materialize we like to deploy the capital that we raise towards acquisitions and so I would look that as a temporary headwind with with the likelihood that we deploy that capital and generate income through the acquisition of a new business but it's roughly the fundraise itself is 22 cents to 24 cents and then there's the all-employee grant that went out to all employees other than the executive team and that had about a 14% headwind that only impacts the first half of the year so the if you think about the EPS growth of roughly you know 10 percent it is growing 10 percent year over year despite the dilution from the fundraise and

despite the dilution from that equity grant and so the organic element of that EPS growth is obviously much bigger right okay and thanks for stepping through that and then you mentioned a number of opportunities here and one of them that stepped out or that stood out to me was the gpo gpu boards opportunity did that is that something that kind of surprised you that has popped up that is new or I haven't heard you talk about that one before and it sounds like that could be It's a big deal and kind of revive that air bearing spindle business.

Yeah, I mean, listen, we haven't talked about this business for a little while. It's we're the really by far the leader in this space in drilling really thick boards very precisely. And it so happens that the material set in Gen.AI and GPU boards are getting tougher and thicker. And the only way you can really do this with throughput and precision, it turns out, is with our spindles. And so, of course, the divisibility is starting to increase around that, you know, starting to increase in the second half of the year. of course, these boards can be drilled in a variety of applications, but it became clear that the leader in GPUs, you know, had a personal interest in this in terms of scaling that. So that's why we're mentioning it. The business is really starting to be on a tear, and therefore, we felt it was good to start to mention it. We see a multi-year trajectory here that is exciting. Nevertheless, of course, there's many other drivers in the company that we've been investing in. But this is a leadership position that we've always had, so really cool capability that we've had. And it typically was applied in a more cyclical part of the semiconductor space. It so happens that it's also needed now to drill these really sophisticated boards, and we're the only ones who can do it. So that's why we thought we'd mention it.

And are you finding that opportunities coming with new customers or existing customers that are ramping up to meet the end market demand?

Yeah, it's, let's say, new end users, let's put it this way. So the way to think about it is you have the OEMs, so the equipment makers, that set of customers is similar. I mean, we've been using or we've been working with those customers over decades. It's a strong relationship, and those customers have been approached to provide, you know, the support for the drilling these boards. So these applications have been developed with us and together with our customers. So, but it's really the end users that, of course, are more, are new geared towards that GPU space. So that's how to see it. Our customers are the same, but the application is, of course, rapidly evolving.

And just one last quick question. You said book the bill was positive across all of the businesses, or just to put a finer point in there, were you talking about the two segments or all four sub-segments, or what do we mean by that?

Yeah, so all four business units and then the two segments. So book the bill was positive. That was the numbers that I was giving Lee in the beginning. Yeah, so positive book-to-bill in every business line. And then obviously as a consequence of aggregation, the two segments had a positive book-to-bill and then the entire company. The nice momentum, building backlog, double-digit bookings in each of the business units. So, and then obviously significant progress in new product revenue, of significant progress in design wins. And so the teams are really hitting their stride.

And the key takeaway, Brian, is that it just supports the sequential momentum that is building and that is broad-based based on structural drivers that are not only, you know, some of it is market, but actually a lot of it is really innovation, commercial excellence, being at the right place, winning business with the right customers in the right markets, right? So that's the takeaway.

Absolutely. Thank you very much.

Thanks.

Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Rob Mason from Baird. Please go ahead with your question.

Good morning, Matthias. I think, you know, you made comment, Matthias, just around the robustness of the M&A pipeline And, you know, the capital raise kind of signaled that as well. You know, as you think about your areas of priority, you know, it seems like you're biased to medical. You've also talked about consumables, embedded software. Obviously, there's a lot of discussion around software, but embedded software seems to infer itself a high degree of stickiness. But could you just maybe elaborate on the filtering process you're going through, you you know, to make sure anything along those lines, you know, has the right level of, you know, protection and mode around it, you know, how should we think about that? And also maybe just any comment on valuation fluidity there as well.

Yeah. Yeah, Rob, great question. So I think we've been pretty consistent in where the focus is and why, but let me kind of just go through that. You know, over the last decade under my tenure, we really grew the medical exposure to now close to 55% of revenue, up from 10%. So that direction of travel is expected to continue, both organically and through M&A. So that's first and foremost. And we're working with all the key leading OEMs in both the life sciences as well as the med tech space. So we now have a competitive mode also around customer access and relationships. And the more and more products we can kind of offer our customers and the more and more solutions that or problems we can solve will be received very positively by the executives of those OEMs because they need capable suppliers that solve more problems for them. Now, rather than educating individual niche suppliers, they're looking at suppliers like us that have the skill, that have the regulatory and quality performance and sustainability to really work with them over the long term. Yeah, so that's the context. Within that, of course, yeah, we have a very strong franchise with the advanced surgery business And that splits into two. One is basically endoscopy and arthroscopy space, and we're starting to build category leadership around that. But that's only 10% of the minimally invasive surgery market, right? So if you think about it, there's huge expansion potential in surrounding applications to the same customer, right? So the same customer base. So that is one, and that will be received as very positive. The second piece that I think we've now built a medical consumables business of 15% of revenue that's growing double digits, very strong franchise where you actually need quality and regulatory and operations chops to deliver these products that, mind you, they will be delivered in procedures, right? So you cannot really alter on delivery performance because otherwise patients will not. get their surgeries, and so that requires a certain level of skill and competence that we feel we now have built. So that's the second pedestal, that's the competence area of medical consumables that we feel is a great jump-off point to add more competences to that, right? So that's a very logical evolutionary next step.

And then there are some surrounding applications and competences that can further build around that and but the third on your third question on embedded software yeah I know there's there's a lot of chatter and concern around the whole software space but think about it as our intelligent subsystems where you have embedded software and hardware into subsystems so you combine just the next layer on top of the hardware that is what we're talking about right this is not the application layer, this is intrinsically combining hardware and software to create functionality. 30% of our business and probably 80% of our product launches are linked to a combination of embedded software and algorithms that work on the hardware, right?

That is what we speak about. So there are certain businesses where we are very progressed around this, like, you know, the advanced surgery business where almost everything is intelligent subsystems. You heard me talk about the beam steering side where we're now entering the business, entering the market with these new capabilities that quite frankly achieve never before possible, let's say, capabilities that are actually three to five times better than what is out there in the market just by combining the different competencies together. So that's what we're we're talking about is more of an added competence on top of the hardware that we have, that is a vertical integration that solves problems cheaper, better, faster for our customers. So it's not, and we feel that it's very well protected. It requires some deep proprietary know-how of the application that is not public, and it really runs directly on the hardware, right, and then the firmware. So that for us, that is what we're talking about. So we feel a very protected area and we're growing rapidly in that area as we speak.

Rob, let me answer your question on the financial side. So the first and foremost, a bolt-on transaction for us, we've been very consistent as to have a return of asset capital that exceeds our cost of capital by year two and a larger one by year five. The metric of return investment capital for us is the after-tax cash flow has to exceed the investment from a ratio perspective, right? So think of it as like free cash flow accretives and growing at a faster rate than Novanda. So you know the very top level I want, we want businesses that are growing, they're top line faster than ours, we want gross margins that are non dilutive, so Therefore, 50% and above type of gross margins and that cash flow really growing at a faster rate. The other metric we tend to look at is the asset intensity of the business. So you can maximize your return multiple ways. The best way that we feel is doing that is acquiring a high cash conversion business. So it has a conversion ratio higher than Novanta, meaning it's cash earnings, it's seed, its asset intensity and grow at a faster rate than Novanta is and then lastly you know we're not looking to over lever the company and and so we try to keep that leverage ratio below three three and a half obviously will bias it to things that are less cyclical than our portfolio and therefore generate stronger alpha with less beta and we've been pretty consistent about that but I think you know regardless of what type of deal we're looking at or the size of deal that we're looking at, you should think of us as being highly disciplined around those metrics.

Yeah, and then maybe just to put a final point to this, if you look at our advanced surgery business that we can agree is doing extremely well, I mean, we follow exactly the same framework there, right? And just by cross-selling to joint companies or customers, sorry, further investigate innovation and further adding an event of growth system to that business, that business has doubled and will double again in the remaining part of the decade. So we feel we can add something to those companies with those returns that Robert talked about so that longer term we can really drive these strategic opportunities and make those businesses better.

Understood. That's very helpful. Maybe I'll just ask a quick follow-up. You talked about how Keon has kind of outperformed plan thus far. I know that's a project-oriented business to some degree, and Project Pipeline has been pretty healthy there. But just what does the first quarter contribution look like in that business before it goes into the organic bucket?

It does help if you're trying to get at, you know, Obviously, you could see the delta between the reported revenue and the organic revenue that we gave, that delta is driven pretty much all by the key on acquisition. A little bit of FX in there, but for the most part, the key on acquisition. You're right in this project business, it's delivered about $9 million of incremental revenue. It has an element of project-based business, but it also has a recurring revenue stream associated with it as well. So each of the individual customers that we work with, we actually sell a software type of solution package to them that is, for all intents and purposes, middleware. It's not an application. And so we, you know, control and own the data that we gather from those readers, and then that data gets sold on to the customer through a recurring revenue stream that they then go out and either mine themselves with artificial intelligence or buy some sort of package application solution that overlays onto it to give them the insights that they're looking for to maximize those stores. It's that concept and that strategic element of it that really got us attracted to the business and why we see the applicability in the hospital environment and why we're excited about that. I should mention we did a very small, you'll probably see it in the 10K, minority investment into a similar business in Spain that has got frontline access to the hospital environment there to allow us to start beta testing our products in that environment and really understanding the best way to penetrate that market and deal with the regulatory hurdles around data privacy and inpatient privacy and how best to package a solution to that marketplace so we are making progress in the strategic core which is around the medical field we continue to feel that we're well positioned to do that and then simultaneously the business is really strongly positioned in its base customers around retail continue to make design win progress continue to win new products new customers and have that momentum so that the growth driver around that we expected to exceed the deal model not only did it do that in 2025 it will exceed the deal model in 2026 we feel very good that that momentum is continued to be present very good thank you that's all and with that everyone will be concluding today's question and answer session I'd like to turn the floor back over to Matthias for closing remarks thank you operator and

thank you everyone for your questions in closing as always I would like to thank our customers or shareholders and especially our dedicated employees for their ongoing support we appreciate your interest in the company your participation in today's call I look forward to joining all of you soon at our first quarter 2026 earnings call and with that everyone will conclude today's conference call we thank you for attending today's presentation you may now disconnect your lines